Indian Railways joins the outsourcing bandwagon

December 21, 2011: The Indian Railways is planning to withdraw from its non core activities through corporatization and outsourcing to concentrate on improving passenger facilities and increasing resources.

The suggestion from a planning commission committee in the railways is to outsource functions like cleaning, supply of linen in trains, to corporatize and disinvest in various areas, to produce rolling stock and locomotives and to manage stations. The planning commission is headed by the chairman of the Railway Board.

This initiative will help in concentrating on upgrading passenger facilities and help in the generation of more revenue. This was the observation made by the Plan Panel’s working group for Railways for the 12th five year plan. It was argued that the separation of non core activities into a group will help in quick up gradation of technology and Independent Research and Development activities as done by China and Japan. 

The idea behind outsourcing is to perform activities such as cleaning of coaches, provision of linen train which are needed in transport by outsourcing it to an outside agency that can do it efficiently and at a lower cost. 

The report prepared by the panel says that the entire gamut of activities that falls outside the core function, i.e. transportation, such as production of rolling stock, handling of parcels, managing key stations and staff homes- would be reviewed from the point of either handling it internally or outsourcing or separating them into a different group on the basis of organic integration.

The activities can be distinguished into two categories: one group with activities that are needed for transport but can be done by another agency more efficiently at a lower cost and the other group consisting of major activities that are required for transport but not strictly a part of transport activities.

The first group consists of activities such as cleaning of coaches, providing linen inside the trains etc. The second group consists of activities such as production facilities for locomotives, coaches, wagons etc. In the case of the first group outsourcing would be an ideal solution, while in the case of the second group, corporatization and phased disinvestment would be an ideal solution.

In several railways across the world such as Chinese and Japanese, corporatization has been successfully implemented to facilitate quick up gradation of technology and Research and Development and concentrate on up gradation of passenger amenities and revenue generation.

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